||Last Updated: Jan 14th, 2008 - 06:28:43
The Irish Independent reports that the Government is facing an investigation by the state's financial watchdog into a new €60m hi-tech fiasco.
A multi-million euro computer system was installed to improve the efficiency of the civil service in managing budgets and taking decisions.
However, the government spending watchdog has launched an inquiry into the system because it has produced "no countable savings", the Irish Independent has learned.
Just one department was able to identify savings arising from a re-allocation of staff as a result of the Management Information Framework (MIF) system, but it could not say how much.
The Comptroller and Auditor General (CAG), John Purcell, is now carrying out a value-for-money inquiry into the system.
Fine Gael Senator Paschal Donohoe raised concerns about the value for money provided by the system after tabling questions about it to all government departments.
He said he had expected it to produce "clear and identifiable savings" but had found that only one department could point to such a result.
"It is staggering that a system designed to improve transparency and accountability is unable to demonstrate the value of what it is delivering to our public services and the value of the savings made by more efficient allocation of resources," he said.
Last month, the CAG published the results of an investigation into a similar computer system for Institutes of Technology, and found that there had been an overspend of €5.7m.
And last week, another CAG report found that the cost of another state computer system had soared from €14m to €37m.
The origin of the MIF system lies with a 1996 policy -- 'Delivering Better Government' -- which called for a new system which would allow better measurement of financial and decision-making performance in the civil service.
It was installed in all government departments between September 2004 and December 2006, and staff were given extensive training in its use.
The Department of Communications, Energy and Natural Resourcse said that since the installation of the new system, staffing levels in the core financial areas "had undergone some reduction".
But the 13 other departments asked to identify costs savings could not provide any specifics.
The Department of Defence said that it was not possible "to quantify any financial savings that may have accrued during 2007 as a result of the operation of the new system".
The Department of Health confirmed it used the system but pointed out that responsibility for spending and performance management in the wider health service was "a matter for the HSE".
The Department of the Taoiseach said the system allowed it to record financial information at a more detailed level and to make electronic payments to suppliers and staff, "thus eliminating unnecessary delays and providing enhanced service to the department's customers".
The Irish Independent also reports that construction activity in the Irish economy in December, as measured by the Ulster Bank Purchasing Managers' Index, fell to its lowest level since the series began back in 2000.
As projects came to an end and few new schemes came on line to replace them, the record low -- although driven by an expected fall-off in housing completions -- was also marked by an unexpected reduction in activity in the commercial and civil sectors.
Pat McArdle, Ulster Bank chief economist said: "House completions are declining at record rates. As housing is two-thirds of construction this dragged overall construction activity into negative territory since mid-2007.
"However, December was unusual in that the other two components -- commercial and civil -- also contracted. Commercial activity has been teetering for some time but is now recording a significant decline. This has happened sooner than expected given that a good number of high-profile projects have yet to complete. The fall in civil activity is surprising as the National Development Plan was maintained and, indeed, accorded priority status in the recent Budget."
The marked fall in activity in the civil engineering sector was all the more surprising in that it was preceded by two months of growth. Commercial activity not only fell but fell at it sharpest rate for almost four-and-a-half years.
Not all see the fall-off in negative terms. While new orders fell for the ninth month in a row at a rate which was the sharpest in the history of the index, some commentators see this as a measure of the responsiveness of Irish firms to falling demand, forestalling very high surpluses which could in turn significantly drive down house prices.
Prices paid for inputs continued to rise in December, although the rate of cost inflation eased for the third month in a row and was the weakest since November 2003. Some firms reported that competition amongst suppliers had restricted input price inflation.
Construction firms are gloomy on the prospects for the sector with one in three expecting activity to be even lower in 12 months' time.
Mr McArlde said: "The outlook remains poor as orders are also at a record low and so is employment. It appears that projects finished are not being replaced and developers are reacting accordingly.
"As a result, confidence has now turned clearly negative though it is still above the 2001 and 2003 lows.
"It remains the case that the more drastic the curtailment of housing activity, the sooner the existing backlog will be cleared, allowing activity to resume."
The Irish Times reports that despite the impact of a strong euro and high inflation in Ireland relative to our trading partners, 2007 was another good year for Irish exports, according to Forfás.
However, in its end-of-year statement, published today, the national policy board for enterprise and trade cautioned that 2008 would be more challenging.
"Fifteen years of economic success, however, has provided Ireland with resources and strong enterprise foundations, which means that we are now better placed than ever before to tackle issues and successfully progress to the next phase of economic development," said Martin Cronin, chief executive, Forfás. "Substantial challenges for enterprise will persist, but Ireland is well-placed to address them."
The statement endorses the National Competitiveness Council's proposal for a national programme to address cost competitiveness, including the setting up of a national inflation target close to the European Central Bank target of 2 per cent.
Forfás says that with domestic demand forecast to fall this year, Ireland will have to look to other sources of economic growth.
"To reorient the economy towards export-led growth, we will need to be both innovative and competitive," Mr Cronin added.
The State agency estimates that exports by Irish-owned firms were up 2.7 per cent in 2007, while exports by foreign-owned entities grew 5.2 per cent. The services sector continued to grow strongly. Forfás says services exports are projected to have increased by 15 per cent in real terms in 2007 following growth of 11 per cent in 2006. At current growth rates, services will account for more than 50 per cent of export earnings by 2010.
Forfás adds that private and public spending on research and development reached €2.5 billion in 2007.
The Irish Times also reports that Ireland's policy to promote innovation through interaction between businesses and third-level institutes is having a disappointingly limited effect, according to a study carried out by two economists from University College Cork (UCC).
In an article in today's Irish Times Innovation magazine, Declan Jordan and Eoin O'Leary from UCC write: "The massive public investment in research at third level may have a disappointingly limited effect on future Irish prosperity."
The article is based on a paper presented by the economists to the Statistical and Social Inquiry Society of Ireland.
"Our study is just one of a number of recent studies that fail to find the positive role for third-level colleges on which the Government has shaped Irish innovation policy."
The Government has committed €8.2 billion in R&D expenditure over the period 2006 to 2013, under the Strategy for Science Technology and Innovation.
The economists claim that the Government policy is based on a "science-push" view of innovation, where scientific laboratories are the source of the new products and processes introduced in Irish businesses.
"It overlooks the majority of business innovations that are non-technological, the shining example of which is Ryanair," they write. "It is also misguided in that business innovation is usually market-led. Historically, third-level institutes have rarely been the main source of business innovation in any country."
In their first survey of 184 high-technology businesses in 2004, they found that the greater the frequency of direct interaction with academics, the lower the probability of both product and process innovation.
In 2007, they undertook a similar survey of nearly 200 small and medium enterprises in the southwest and southeast and found interaction with third-level institutes had no effect on innovation.
In a written response, a spokesman for the Department of Enterprise, Trade and Employment said: "The policy implications put forward are based on the false premise that Government policy is static and unresponsive to emerging trends. A more careful consideration of Government policy would show that there are multiple objectives underpinning an integrated science, technology and innovation strategy."
SEE also Finfacts article: The Irish Mind and the Knowledge Economy: Should we bank everything on fuzzy leprechaunic political dreams?
The Irish Examiner reports that Shannon Airport is aiming for overall growth on its British and European routes this year in spite of the loss of the London-Heathrow service.
The final Aer Lingus flight on the route took off last night and the ending of the service will result in Shannon losing 320,000 passengers, or 10% of its terminal traffic.
However, airport director Martin Moroney said: “It is a severe loss, a big blow as it was a highly important route, but I believe we have restored our global connectivity with the Air France-Cityjet service to Paris Charles de Gaulle, which commences on February 4.”
Mr Moroney added the launch of Ryanair services to other London airports and the Cityjet service will nearly make up the shortfall in passenger numbers this year and should exceed the 320,000 figure in 2009. Mr Moroney said about 320,000 passengers used the Aer Lingus service last year, which was “on a par” with 2006.
Mayor of Clare Councillor Patricia McCarthy said yesterday was a sad day in the history of Shannon airport. “It is underestimated the hurt and damage that the loss of the service has caused in the mid-west. We hope that this will only be a short-term situation. We have learnt lessons from this and we will all be working harder to ensure that Shannon remains viable,” she said.
“The Minister for Transport and his cabinet colleagues should hang their heads in shame today.”
A total of 51 Aer Lingus workers will lose their jobs as a result of the move. Aer Lingus worker and vice-chairwoman of Shannon Action Group Geraldine Morrissey said: “It is sad for all of us. We are disappointed and upset.”
The Belfast-Heathrow service commences today and Aer Lingus’s director of corporate affairs Enda Corneille said the company “is pleased with the take-up” of the new Belfast service.
“It is within expectations,” he said.
The Financial Times reports that Merrill Lynch is seeking about $4bn in a second capital raising, as the hole in the US investment bank’s balance sheet continues to grow.
The Kuwait Investment Authority is expected to be a significant investor in the new deal, which could be announced as soon as midweek, according to people familiar with the matter. Other investors could come from Europe.
KIA, which may also invest as much as $2bn or $3bn in Citigroup, is emerging as an large source of rescue finance on Wall Street. Once among the most conservative of sovereign wealth funds, KIA is changing its strategy in order to move more quickly than competitors and seize opportunities amid the turmoil in the US credit markets, these people say. Both Merrill and KIA declined to comment.
Both the price and the terms of the deals at Citi and Merrill are still being negotiated.
The latest round of capital raising comes at the start of a round of earnings reports during which big US banks and brokers are expected to reveal as much as $40bn in further mortgage-related writedowns. Action taken by Citi and Merrill will be closely watched by other institutions
Citi is expected to announce a writedown of close to $20bn and present plans to raise as much as $14bn in new capital from the Chinese and public market investors as well as the KIA. Analysts expect Vikram Pandit, Citi’s recently installed chief executive, to slash the dividend 40 per cent or more to improve Citi’s capital position.
The infusion would follow the $7.5bn Citi raised from the Abu Dhabi Investment Authority in late November.
Merrill Lynch on Thursday is expected to announce a writedown of $10bn to $20bn. Brad Hintz, Sanford Bernstein analyst, said a writedown of more than $20bn “would significantly increase leverage and would threaten the credit ratings of the firm”.
Any new capital infusion from the KIA and others would follow the $6.4bn Merrill raised last month from Temasek, the Singapore government fund, and Davis Selected Advisors, a New York-based asset manager.
More positive news is expected to come from JPMorgan Chase on Wednesday. The bank, which has avoided the worst of the mortgage problems thus far, is expected to report earnings of 93 cents per share, a decline of 14 per cent from last year.
JPMorgan is in a strong position and is thought likely to pursue a significant US acquisition to expand its domestic consumer business. Often mentioned candidates include Washington Mutual and SunTrust.
News that Citi is seeking further financing from sovereign wealth funds comes as some analysts in Washington say the state-controlled funds could soon face closer scrutiny.
Chuck Schumer, the New York senator and influential Democrat, quickly blessed an investment last year in Citi by Abu Dhabi. But last week, Mr Schumer expressed a hint of caution at reports that the US bank might receive more foreign government investment.
“Because sovereign wealth funds, by definition, are potentially susceptible to non-economic interests, the closer they come to exercising control and influence, the greater concerns we have,” he said.
While few predict that investment could be blocked, one Washington attorney who works on cross-border transactions says he believed minority investments could become subject to reviews by the inter-agency Committee on Foreign Investment in the US (Cfius)that investigates foreign takeover of US assets.
“It is one thing if you have one or two of these smallish deals,” the attorney says. “It is quite another thing, when institutions are being propped up by a bunch of investors, all from the same three states.”
So far, Citi and private equity groups that have received minority investments have not submitted their transactions to a voluntary review by Cfius. That could change if the political temperature increases on such deals.
The FT also reports that the sudden fall in sterling could force a realignment of Britain’s economic relationship with the eurozone, resulting in potentially painful consequences for both it and the 15-country bloc.
Since November the pound has fallen by almost 9 per cent against the euro – a rate of decline not far off that seen during sterling’s enforced exit from the European exchange rate mechanism in 1992, when it fell 11 per cent against Germany’s D-Mark.
It is “astonishing how quickly [sterling] has gone down”, said Ben Broadbent, of Goldman Sachs. The drop is rekindling memories of “Black Wednesday” in 1992, which helped to bury the then Conservative government’s reputation for economic competence. Symbolically troubling, the currency’s weakness makes France’s economy larger than that of Britain for the first time since 1999.
The list of causes is long. UK interest rates are expected to be cut, Britain’s trade position looks increasingly precarious, capital inflows from companies buying UK assets have slowed sharply, and a perception of poor economic management has grown since the credit squeeze hit the world in August.
But most economists think the adjustment is necessary even if it hurts in the short run. The UK’s current account deficit is seen as increasingly unsustainable; it is now the largest among the Group of Seven leading economies after big downward revisions to foreign income at the end of last year.
Sterling’s hitherto sustained strength had fooled people into believing “you can run the economy permanently on the back of consumer spending and rising land prices”, said Martin Weale, director of the National Institute of Economic and Social Research.
Still, the pound’s fall will complicate the life of the Bank of England’s monetary policy committee by raising inflation, at least in the short term. Goldman Sachs estimates the direct impact will be an increase in inflation to more than 2.7 per cent by the autumn, or higher if the weaker currency has knock-on effects on wage claims and inflation expectations. In such a climate, the bank will be more cautious about cutting interest rates.
In the longer term, the erosion in real incomes implied by a depreciation might make the grass seem greener in the eurozone. While there is little economic merit in such thoughts, the strength of sterling and the perception that Britain was stronger than the eurozone have been powerful forces in swaying public opinion against joining Europe’s single currency.
Across the Channel, the focus could soon switch to the impact on eurozone exporters, who have accounted for much of the region’s growth in recent years. So far eurozone politicians have fretted about the dollar’s weakness. It is true that the pound does not have the same global role as the US currency, but the eurozone exports more to the UK than to the US.
Hence the pound’s fall will add to the difficulties already created by the slowdown in the US and the continuing global credit squeeze. “It is another source of potential weakness for the eurozone economy – and there is no shortage of them,” said Ken Wattret, of BNP Paribas.
The 4.5 per cent rise in the euro on a trade-weighted basis since last June – due in large part to sterling’s fall – would be expected to knock about 0.4 or 0.5 percentage points off growth if everything else remained equal, according to Goldman Sachs’ calculations.
So far the European Central Bank has not commented on the pound’s fall. It remains relatively upbeat about eurozone growth, which it expects to be in line with the long-term trend this year. Robust growth in emerging markets is expected to offset the impact on eurozone exporters of weaknesses elsewhere in the world.
Whereas Jean-Claude Trichet, ECB president, was happy last year to stress the US commitment to a strong dollar, he dodged a question last week on whether a strong pound would be in Britain’s interest.
That reflected the ECB’s reluctance ever to talk about exchange rates. At the same time, the actual effects of the pound’s weakness are hard to judge and will take time to work through.
The UK economy’s level of demand may prove more important than the exchange rate – but demand is weakening too.
Mr Wattret said: “It might be that the full impact of what we’re seeing in the UK, and the impact on the eurozone, has not yet registered at the ECB.”
The New York Times reports that strong evidence is emerging that consumer spending, a bulwark against recession over the last year even as energy prices surged and the housing market sputtered, has begun to slow sharply at every level of the American economy, from the working class to the wealthy.
The abrupt pullback raises the possibility that the country may be experiencing a rare decline in personal consumption, not just a slower rate of growth. Such a decline would be the first since 1991, and it would almost certainly push the entire economy into a recession in the middle of an election year.
There are mounting anecdotal signs that beginning in December Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy.
A raft of consumer companies — high-end stores like Nordstrom and Tiffany, and middle-of-the-road ones like Target and J. C. Penney — reported a pronounced slowdown in growth last month, and in several cases an outright drop in business.
American Express said that starting in early December the growth in the rate of spending by its 52 million cardholders, a generally affluent group of consumers, fell 3 percentage points, from 13 percent to 10 percent, the first slowdown since the 2001 recession.
And consumer confidence, an important barometer of economic health, has plunged. Andrew Kohut, president of the Pew Research Center, says consumer satisfaction with the economy has reached a 15-year low, according to the firm’s polling.
Even wealthier consumers, who were seen as invulnerable to rising gasoline prices and falling home values, are feeling the squeeze.
“People are clearly concerned that we are headed into a recession,” said Stephen I. Sadove, the chief executive of Saks Fifth Avenue, the upscale department store whose runaway growth throughout much of the year slowed markedly in December.
Gia Trumpler, 37, a travel consultant who lives in Manhattan, shops at luxury chains like Saks. But she is trimming costs where she can by bringing lunch to work from home, rather than eating out. “Everything just feels more expensive to me now,” she said, including the cost of heating her apartment this winter.
There are plenty of recession naysayers. Average hourly wages and salaries have not fallen, and some economists argue that unless — or until — that happens, consumer spending will hold up despite widespread economic unease. According to these economists, what happened in December was a temporary blip.
“Incomes have managed to hold up,” said Chris Varvares, president of Macroeconomic Advisers, an economic forecasting firm, who added that the data to date did not support the view that a recession was inevitable.
Even in tough economic times Americans rarely reduce their consumption, preferring instead to slow the growth in their spending. Since 1980, they have cut spending in only five quarters — a total of 15 months — most of them in the depths of a recession. The 2001 recession passed without a cutback in consumer spending.
Only once before, in 1980, did consumer spending fall during a presidential election year, helping Ronald Reagan in his campaign against Jimmy Carter, the Democratic incumbent.
Official statistics do not yet show that consumer spending has dropped, but they do suggest that in late 2007, it slowed in areas like automobiles, furniture, building materials and health care, said Mark M. Zandi, chief economist at Moody’s Economy.com.
Fresh evidence of a pullback is pouring in from many quarters as Americans confront the triple threats of higher energy costs, falling home prices and a volatile stock market.
Perhaps the strongest barometer over the last 30 days is the performance of the country’s big chain stores. December turned out to be a blood bath for retailers at every rung on the economic ladder, with sales for the month growing at the slowest rate in seven years.
Sales at stores open at least a year, a crucial yardstick in retailing, plunged by 11 percent at Kohl’s and 7.9 percent at Macy’s, compared with last year.
Chains that cater to the middle and upper classes, which have benefited from years of trading up — when customers splurge on select expensive products — struggled as well. Coach, the leather goods maker, said sales of its popular handbags had become sluggish, prompting the company to issue rare coupons to drum up business.
“This is the real deal — consumers are slowing down across the spectrum,” said David Schick, a retail analyst at Stifel Nicolaus.
But it is the trouble at the highest reaches of retailing that has economists most worried about a recession. Over the last year, even as low-wage and middle-income consumers have cut back, the wealthy have spent freely, keeping high-end chains insulated from the economic turbulence.
That started to change in December, as shoppers held off on buying $300 designer shoes and $500 dresses. For example, store sales fell 4 percent at Nordstrom, the high-end department store.
And Tiffany, the upscale jeweler, said the number of purchases at its stores dropped last month. In an interview, its chief executive, Michael J. Kowalski, said that even if the wealthy remain so at least on paper, their economic anxiety is taking a toll.
“It’s a reaction to the general economic uncertainty everyone is feeling,” he said. “There are housing price declines and financial market instability. There is a lot of caution out there, and it’s reflected in jewelry sales.”
At the same time, the number of overdue payments on American Express cards is surging, the company said — and this among well-heeled cardholders who charge up to $12,000 a year, on average, on each card. American Express has called some cardholders in the last few weeks to ask if they will have trouble paying their bills.
“We are seeing a correlation with housing prices,” said Michael O’Neill, a spokesman for American Express. “The falloff in spending is everywhere in the country, but it is greatest in those areas like south Florida and California, where home prices have fallen the most.”
The big exception is gasoline. American Express and the Consumer Federation of America say that consumers are buying just as many gallons as ever, but paying more for them, and that has forced cutbacks in other purchases. Gasoline prices usually drop after the summer driving season, but this year they shot up, from $2.85 a gallon on average in September to $3.07 in December and $3.15 in the first week of January.
A similar trend is evident in the cost of natural gas, electricity and home heating oil. “We built these big houses in the suburbs, which need a lot of energy to stay warm and a car to go shopping,” said Stephen Brobeck, executive director of the Consumer Federation. “And we can’t change that quickly.”
The impact of rising gasoline prices “is just profound on middle- and lower-income families,” said Mr. Kohut of the Pew center. “Our surveys are showing one of the lowest levels of satisfaction with national conditions in any recent presidential election year. You have to go back to 1992 to get a lower number of people saying the national economy is excellent or good.”
The nation was recovering from recession that year. Consumer spending had contracted in two separate quarters in 1991, and while economic growth was gradually accelerating as Bill Clinton and George H. W. Bush sought the presidency, the Clinton camp famously posted a sign in its campaign war room proclaiming, “It’s the economy, stupid.”
There are some bright spots now in consumer spending. Sales of sports gear and electronic gadgets — particularly G.P.S. navigation devices and flat-panel television sets — have risen over the last three months. To Stephen Baker, vice president for industry analysis at the research firm NPD Group, that suggests there is still enough purchasing power for people to buy what they really want.
“We probably would not have seen strong sales for electronics products that people really want if the overriding issue was economic,” Mr. Baker said.
But not everyone is splurging. Jinal Shah, 22, a college senior in New York, said she wanted to buy the popular Nintendo Wii video game system as a gift for herself this holiday season, but had second thoughts because of the $250 price tag. She ended up not purchasing it.
“You have to make choices,” she said. “I get the Wii, or I go out more. I am just much more aware of the tradeoff now.”
The NYT also reports that the Toyota Motor Corporation, which leads the world’s automakers in sales of hybrid-electric vehicles, announced Sunday night that it would build its first plug-in hybrid by 2010.
The move puts Toyota in direct competition with General Motors, which has announced plans to sell its own plug-in hybrid vehicle, the Chevrolet Volt, sometime around 2010.
Katsuaki Watanabe, the president of Toyota, announced the company’s plans at the Detroit auto show as part of a series of environmental steps.
Mr. Watanabe said Toyota, best known for its Prius hybrid car, would develop a fleet of plug-in hybrids that run on lithium-ion batteries, instead of the nickel-metal hydride batteries that power the Prius and other Toyota models.
Plug-in hybrids differ from the current hybrid vehicles in that they can be recharged externally, from an ordinary power outlet. In a conventional hybrid the battery is recharged from power generated by its wheels.
Mr. Watanabe said the lithium-ion fleet would be made available first to Toyota’s commercial customers around the world, like government agencies and corporations, including some in the United States. He did not say when they would be available to consumers.
The Volt also is set to run on lithium-ion batteries, which are more expensive than the batteries currently used by Toyota, but which can potentially power the vehicle for a longer time.
Additionally, Toyota said it planned to develop a new hybrid-electric car specifically for its Lexus division as well as another new hybrid for the Toyota brand. It said it would unveil both at the 2009 Detroit show.
Mr. Watanabe also said Toyota planned to offer diesel engines for its Tundra pickup truck and the Sequoia sport utility vehicle “in the near future,” but was not more specific.
Some environmental groups have pushed for plug-in hybrids, called PHEVs, or plug-in hybrid electric vehicles, as a way to save on gasoline, thus curbing emissions.
But some experts say plug-ins may not be the ultimate answer to cutting pollution, if the electricity used to charge them comes from coal-fired power plants.
That is also a concern to Toyota, which has asked researchers to determine not only whether consumers would be willing to pay for a plug-in, but also the effect it would have on the environment, James Lentz, the president of Toyota Motor Sales, said in an interview Sunday.
Nonetheless, G.M., Toyota and Ford Motor, the world’s three biggest car companies, all are developing plug-in hybrid vehicles. Along with the Volt, G.M. has said it plans to produce a plug-in version of its Saturn Vue hybrid. Ford has not yet given details of its plug-in hybrid, which it first discussed in 2006.
Indeed, Toyota executives initially questioned the practicality of plug-in hybrids, saying consumers preferred the convenience of hybrids that did not have to be recharged. Toyota has sold more than one million hybrids worldwide, including more than 800,000 Prius cars.
But the automaker announced last July that it was testing plug-in hybrids on public roads in Japan. It also is testing them in France, Toyota officials said Sunday, and it has given prototype versions of plug-in hybrid vehicles to university researchers in California.
Even before those test results are in, however, Toyota has offered plug-in hybrid test drives to journalists in Japan, California and Detroit, where a small fleet bearing the words “Toyota Plug-In Hybrid” traveled city streets on Sunday.
This plug-in hybrid — a version of the Prius, and not the vehicle Toyota announced it would build — differs from the Prius in four ways. It has two nickel-metal hydride batteries under the floor of its trunk, instead the conventional Prius’s single battery.
Unlike the Prius, which has a single fuel-filler door on the left side of the car, the plug-in model has another door on the right hand side that opens to reveal an outlet for the electrical charger. One end of the charger looks like a small fuel nozzle; the other end is a conventional three-pronged plug.
Each charge, which takes about four hours, uses the equivalent of 2.7 kilowatt hours of electricity, said Jaycie Chitwood, a senior strategic planner in Toyota’s advanced technologies group.
Inside the car, there is a button with the letters “EV” inside an outline of a car. If the driver pushes the button, the car reverts to electric vehicle mode, meaning the Prius is powered completely by its two batteries.
In electric mode, the Prius gets 99.9 miles a gallon, according to a gauge on a screen in the middle of the dashboard.
But it cannot go very far: the plug-in hybrid’s two batteries hold enough power for only seven miles, said Saúl Ibarra, a product specialist with Toyota who worked on developing the Prius.
By contrast, G.M. claims that the Volt will be able to hold a charge equal to 40 miles, after a six-hour charge.
Still, the electric mode of the Toyota plug-in is enough to start the car and run it until the engine reaches the point where it needs to tap the gasoline engine. The plug-in Prius can stay in electric mode until 62 miles per hour, versus around 30 miles per hour for the conventional Prius, Mr. Ibarra said.
Despite its decision to step up its plug-in hybrid development, Toyota is not sure how much more consumers will want to pay for it, Mr. Lentz said. The Prius starts at $21,100. Some after-market companies are charging nearly that much to convert Prius models into plug-ins, he said.
Given that, it is more likely that Toyota would offer plug-in technology as an option on the Prius, at least in the short term, rather than switch all of its hybrids to plug-in models.
Ultimately, Toyota must determine “do people want to plug in their car?” Ms. Chitwood said.
© Copyright 2007 by Finfacts.com
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